Following yesterday’s private equity buy out of Interactive Data, speculation about what the future may hold for the number three data vendor has rippled across the industry. Speaking to Reference Data Review, president and CEO of Interactive Data Ray D’Arcy indicates that in the short term the vendor will benefit from much closer relationships with the firms that Warburg Pincus and Silver Lake already own, including the latter’s SunGard Data Systems.
The nature of this closer relationship is obviously undefined at this present moment, but D’Arcy notes that SunGard is already a user of Interactive Data’s services and there is potential for a lot of synergy between the two. It also represents the closest vendor under Silver Lake’s remit to the Interactive Data business model. Whether this means a merger of business lines in the long term is not yet clear, although this could be the logical extension of a splitting of Interactive Data’s two main business lines.
According to an insider involved in the transaction, the private equity owners are keen to split the real-time data business from the pricing and valuations solution set. The decision to acquire Interactive Data in its entirety, rather than just the 61% share on offer from Pearson, gives the private equity firms free rein to do what they please with the business and it seems a breakup may be on the cards.
The Pricing and Reference Data business could therefore sit within SunGard’s Data Management portfolio, alongside current offerings Fame and StreamCore. After all, SunGard’s outsourcing and workflow tools could complement Interactive Data’s wider valuations and data offering much the same as potential acquirers such as McGraw Hill. Whereas Interactive Data’s Real-Time Market Data & Trading Solutions business wouldn’t be out of place within SunGard’s overall Trading solution set, which includes Protegent, the recently launched Valdi portfolio and the SunGard Transaction Network.
Of course, D’Arcy is giving nothing away just yet. After all, the deal was signed less than 24 hours ago (at 2am ET on 4 May). He is, however, confident that the transaction will be concluded by the third quarter of this year and indicates that it will be business as usual until that time. “Since we entered this re-evaluation period, we have continued to execute on the strategy we laid out last year,” he contends. “We have completed three acquisitions and we have reorganised out real-time business, as well as expanding the offerings available within our pricing and reference data business.”
This work is set to continue over the coming months and D’Arcy explains that the focus will be on developing new products, expanding databases, launching a fixed income portal for compliance purposes and expanding in Asia. He notes that it is critical in the current climate for the vendor to reach its financial targets this year.
Overall, D’Arcy is hoping to leverage the vendor’s new ownership structure to become much more competitive in the market. Even though Interactive Data is number three in the market at the moment, D’Arcy is keen to catch up to arch rivals Thomson Reuters and Bloomberg. A lot of the negotiation time before the deal was signed was, in fact, taken up by discussions about how to accelerate the vendor’s growth strategy, he explains. “The focus is on increasing profitability and growth and leveraging the other companies in the private equity firms’ portfolios,” he adds.
SunGard is just one of these companies with potential, notes D’Arcy, who points to Nasdaq, Fidelity and Wall Street Systems as others in a suitably compatible financial services segment. “It will be beneficial over this year to get to know the entities that Silver Lake and Warburg Pincus own and how they could fit with our offering. Warburg Pincus’ global presence should also aid us in our strategy to expand more aggressively across the globe,” he elaborates.
Interactive Data’s previous ownership structure was rather limiting in comparison, due to a requirement to meet public shareholder demands and fit into the overall Pearson portfolio. Private equity ownership should give the vendor more room to invest in the short term and accelerate the strategies that it has already defined. D’Arcy points to the vendor’s electronic trading strategic push as a real area of focus with regards to this investment and notes that hosted wealth management solutions are also on the radar.
“We are well positioned to take advantage of the trends in the market such as the boom in electronic trading and the regulatory environment,” he adds. “This has given our company a wonderful platform to take us to the next level.”
What this next level will look like is still up in the air at the moment, but it will be interesting to see which route the vendor takes in the long term.